Thursday, July 13, 2006

US Senate Foreign Relations Committee Hearing Looks at Camisea

The July12th hearing of the US SFRC examined the effectiveness of mutlilaterlal intestments in large infrastructure. Witnesses speaking on Camisea included Clay Lowry, Assistant Secretart for International Affairs for the US Treasury Department; Jaime Quijandria, Executive Director for Argentina, Bolivia, Chile, Paraguay, Peru and Uruguay at the World Bank and ardent Camisea supporter; and Carlos Herrera Descalzi, Former Minister of Energy and Mines of Peru, who has been critical of the way the Camisea contracts have been modified to favor natural gas export over meeting Peru's energy security needs.

The hearing room was packed with InterAmerican Development Bank staff, press, and many NGO's tracking the project.

The most impressive quote came from Lowry who told the committee, "We are of the view Camisea has not been a success. It could have been better designed." He also said, as quoted in Reuters:

"The IADB's role is to catalyze, not fill gaps in financing," Lowery said. "Because they came in late in the game they were not involved in the environmental and social safeguards," he added. "As to how the United States will vote, or look at Camisea 2, we haven't decided yet."

"The IADB does have fairly significant resources in terms of environmental and compliance issues. Where they probably made mistakes on Camisea 1 was underestimating how much it would take to make the project work,"

Herrera, who signed the original contracts with the Camisea consortium when he was Peru'[s Energy Minister said that the development of Camisea II (export phase) should not come at the cost of this original objective of Camisea I which was energy security for Peru.

Quijandria's testimony seemed to be taken verbatim from the IDB's propaganda on the project. He described the project as "the largest and mowt complex project in Peru's history" and attrributed it to lowering energy prices in Peru.

The real story is more complex. End consumer energy prices in Peru were held artificially low in Peru while Quijandria was Energy Minister, and so producers lost money and stop generating, creating an energy crisis. In fact, little of Peru's energy infrastructure is built to operate with natural gas, an excuse project sponsors have used to justify its export. However, by the time natural gas infrastructure is developed in Peru, export will be well on its way and Peru could ironically wind-up importing gas at world prices.